Adopted from The Wall Street Journal
In June, Warren Buffett, the CEO of Berkshire Hathaway, made a big bet – a million dollars to be precise. He bet Protégé Partners LLC, a New York City money management firm that runs funds of hedge funds that they could not beat the S&P 500 over the next ten years. I know it’s early, but Buffett is showing signs that he’s easily winning this sucker’s bet. How do I know?
Mark Summers III, a hedge fund manager and owner from Chicago is shutting down his firm and retiring. Last summer, he managed $300 million.
"What I've learned about the hedge-fund business is that I hate it," says Mr. Sellers, a former stock analyst with Morningstar. "I have enough money that I don't have to work, and why should I put myself under that much stress?"
The past year has been brutal for hedge funds, and September looks to be the worst month in a decade in the industry, according to Hennessee Group, which advises hedge-fund investors. Funds of all sizes have been battered, but the bigger players can often endure rough times.
The day of reckoning can arrive remarkably fast for managers with assets under the half-billion-dollar mark, like Mr. Sellers, who started July with performance up 50% on the year but by the end of last month was down 20%.
"There are real questions about who can stay in business," says Andrew Fishman, president of Shonfeld Group, a New York brokerage and trading firm whose hedge-fund clients range from about $200 million to $3 billion in assets. The most vulnerable are under $1 billion, he says. "There are guys who should not have been in business, and this will force them out, but guys don't want to give up easily."
